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Result and Price Analysis

State Bank of India (SBIN) has delivered a stable result on operating and assets quality front. Reported gross slippages stood at ₹28bn v/s ₹23bn in the previous quarter. Its reported GNPA (3.97% v/s 4.5% in 3QFY22) and NNPA (0.97% v/s 1.34% in 3QFY22) improved noticeably along with stable PCR (incl. AUCA) of 90%. Furthermore SMA2 (2bps v/s 6bps) decreased considerably. The bank has witnessed better than expected advance growth (11.6% YoY & 6% QoQ) led by wholesale credit growth and stable deposit growth (10% YoY & 5.3% QoQ) sequentially with better liquidity position. Moreover the bank has reported PAT of ₹91bn (v/s ₹84bn in 3QFY22) on back of stable NII growth (15.3% YOY and Domestic NIMs: 3.36%) along with steady operating expenses. The 4QFY22 calculated ROA and ROE stood at 0.74% and 13% respectively. Management reiterated the target ROE of 15% in mid run. The bank has established total standard asset and contingent provision of ~₹306bn (112bps of net advances) as on 4QFY22. With improving asset quality, ample contingent buffer and strong growth outlook, we believe the ROE target of 15% is achievable in mid run. We recommend BUY with target price of ₹565.

Gazing the core

GNPA improved on the back of higher upgrades and recoveries:

The bank’s slippages were slightly higher sequentially to ₹28bn (v/s ₹23bn). However, higher upgrades and recoveries (₹68bn v/s ₹23bn in 3QFY22) led to decrease in absolute GNPA amount by 7% QoQ. The bank’s asset quality improved as reported GNPA/NNPA/PCR ratio stood at 3.97%/1.0.2%/90% against 4.5%/1.34%/88% in 3QFY22. GNPA ratio of retail, agriculture, SME and corporate segment stood at 3.8%, 13.3%, 6.5%, and 6% respectively. Additionally, The Bank’s SMA 1 (₹30bn, 11bps) marginally higher; where SMA 2 (₹5bn, 2bps) decreased by 65%. Moreover, BB & below book remains flat at 11% of wholesale book. The restructured pool came down to ₹310bn (113bps of net advances) from ₹329bn (128bps) in the previous quarter. Management expects the pool to stay stable in near term.

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